After the Finance Ministry late last night unveiled the draft guidelines of the General Anti-Tax Avoidance Rules (GAAR), Sensex today clocked its biggest single-day gain in 2012 so far, making investors richer by Rs 1.17 lakh crore.
Market participants cheered the Finance Ministry's proposals of a monetary limit for invoking GAAR and use of the tax-avoidance rules only in cases where FIIs choose to take the benefit of double tax avoidance treaties, amongst others.
The surge was across the market as nearly 1,870 of the 2,982 stocks rose with investor wealth shooting up to Rs 61.52 lakh crore.
In the forex market, the rupee - which has lost over 25 per cent against the dollar in the past 12 months - staged a strong comeback as it recorded the second best gains of 119 paise in nearly a decade.
The currency's fortunes reversed as FIIs pumped in Rs 3,046 crore, according to provisional data with stock bourses.
"The glum mood over the GAAR issue could well take a backseat as the government is all set to resolve outstanding tax issues in the next couple of weeks," said brokerage India Infoline Ltd (IIFL).
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Meanwhile, Prime Minister's Office (PMO) said a final call on GAAR will be taken by the Prime Minister Manmohan Singh after proper feedback.
After taking charge of the Finance Ministry, the Prime Minister had called for reviving the animal spirit of economy. Draft GAAR guidelines that came soon after Singh took stock of the economy have now re-energised investor community, analysts said.